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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Albion Enterprise Vct Plc | LSE:AAEV | London | Ordinary Share | GB00B1G3LR35 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 119.50 | 118.00 | 121.00 | 119.50 | 119.50 | 119.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Investors, Nec | 5.74M | 2.77M | 0.0274 | 43.61 | 120.55M |
From Apr 2022 to Apr 2024
TIDMAAEV
Albion Enterprise VCT PLC
LEI number: 213800OVSRDHRJBMO720
As required by the Financial Conduct Authority's Disclosure Guidance and Transparency Rules 4.1 and 6.3, Albion Enterprise VCT PLC today makes public its information relating to the Annual Report and Financial Statements for the year ended 31 March 2022.
This announcement was approved for release by the Board of Directors on 30 June 2022.
This announcement has not been audited.
The Annual Report and Financial Statements for the year ended 31 March 2022 (which have been audited), will shortly be sent to shareholders. Copies of the full Annual Report and Financial Statements will be shown via the Albion Capital Group LLP website by clicking www.albion.capital/funds/AAEV/31Mar2022.pdf.
Investment policy
Albion Enterprise VCT PLC (the "Company") is a Venture Capital Trust and the investment objective of the Company is to provide investors with a regular source of income, combined with the prospect of longer term capital growth.
Investment policy
The Company will invest in a broad portfolio of higher growth businesses across a variety of sectors of the UK economy including higher risk technology companies. Allocation of assets will be determined by the investment opportunities which become available but efforts will be made to ensure that the portfolio is diversified both in terms of sector and stage of maturity of company.
VCT qualifying and non-VCT qualifying investments
Application of the investment policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HM Revenue and Customs ("VCT regulations"). The maximum amount invested in any one company is limited to relevant HMRC annual investment limits. It is intended that normally at least 80 per cent. of the Company's funds will be invested in VCT qualifying investments. The VCT regulations also have an impact on the type of investments and qualifying sectors in which the Company can make investment.
Funds held prior to investing in VCT qualifying assets or for liquidity purposes will be held as cash on deposit, invested in floating rate notes or similar instruments with banks or other financial institutions with high credit ratings or invested in liquid open-ended equity funds providing income and capital equity exposure (where it is considered economic to do so). Investment in such open-ended equity funds will not exceed 10 per cent. of the Company's assets at the time of investment.
Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses within Venture Capital Trust qualifying industry sectors using a mixture of securities. The maximum amount which the Company will invest in a single company is 15 per cent. of the Company's assets at cost, thus ensuring a spread of investment risk. The value of an individual investment may increase over time as a result of trading progress and it is possible that it may grow in value to a point where is represents a significantly higher proportion of total assets prior to a realisation opportunity being available.
Gearing
The Company's maximum exposure in relation to gearing is restricted to 10 per cent. of its adjusted share capital and reserves.
Financial calendar
Record date for first interim dividend 5 August 2022 Payment date for first interim dividend 31 August 2022 Annual General Meeting Noon on 30 August 2022 Announcement of Half-yearly results for the six months December 2022 ending 30 September 2022
Financial highlights
Hot Features
Premium
23.77p Increase in total shareholder value (pence per share)
for the year ended 31 March 2022
-----------------------------------------------------
20.74% Shareholder return for the year ended 31 March 2022
-----------------------------------------------------
6.09p Tax-free dividend per share for the year ended 31
March 2022
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132.28p Net asset value per share on 31 March 2022
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194.66p Total shareholder value to 31 March 2022
-----------------------------------------------------
These are considered Alternative Performance Measures, see notes 2 and 3 in the Strategic report below for further explanation.
31 March 2022 (pence per 31 March 2021
share) (pence per share)
Opening net asset value 114.60 106.54
Capital return 23.78 13.96
Revenue return/(loss) 0.19 (0.51)
---------------------------- ------------------
Total return 23.97 13.45
Dividends paid (6.09) (5.44)
Impact from share capital
movements (0.20) 0.05
---------------------------- ------------------
Net asset value 132.28 114.60
Pence per share
Total dividends paid per share to 31 March 2022 62.38
Net asset value per share on 31 March 2022 132.28
---------------
Total shareholder value per share to 31 March 2022 194.66
--------------------------------------------------- ---------------
A more detailed breakdown of the dividends paid per year can be found at www.albion.capital/funds/AAEV under the 'Dividend History' section.
In addition to the dividends summarised above, the Board has declared a first dividend for the year ending 31 March 2023, of 3.31 pence per Ordinary share to be paid on 31 August 2022 to shareholders on the register on 5 August 2022.
Chairman's statement
Introduction
The Company has achieved an increase in total shareholder value of 23.77 pence per share for the year (20.7% on opening net asset value), after a strong year for several of our portfolio companies. The Company continues to benefit from the resilience of its portfolio, particularly its healthcare and software businesses, many of which have achieved excellent growth despite the worsening economic outlook resulting from the effects of the Covid-19 pandemic, the Russian invasion of Ukraine and high inflation. It is not clear how long the economy will be impacted, however I am encouraged that we continue to see attractive investment opportunities in the health technology and enterprise software sectors where the Manager has developed deep expertise.
Results and dividends
On 31 March 2022 the net asset value was 132.28 pence per share compared to 114.60 pence per share on 31 March 2021. The total return before taxation was GBP18.1 million compared to a return of GBP9.2 million for the previous year. The positive progress of a number of our portfolio companies is discussed later in this statement and in the Strategic report below. These excellent results for the year have resulted in a performance incentive fee payable to the Manager of GBP1.9 million (2021: GBP0.3 million).
In line with our variable dividend policy targeting around 5% of NAV per annum the Company paid dividends totalling 6.09 pence per share during the year ended 31 March 2022 (2021: 5.44 pence per share). The Company will pay a first dividend for the financial year ending 31 March 2023 of 3.31 pence per share on 31 August 2022 to shareholders on the register on 5 August 2022, being 2.5% of the latest reported NAV.
Investment performance and progress
The Company has received disposal proceeds of GBP10.2 million (2021: GBP5.3 million). Five portfolio companies were sold in the year:
-- Phrasee generated proceeds of GBP2.7 million and a return of 3.2 times cost; -- MyMeds&Me generated proceeds of GBP2.4 million and a return of 3.4 times cost; -- Credit Kudos generated proceeds of GBP2.3 million and a return of 5.2 times cost; -- MPP Global Solutions generated proceeds of GBP1.3 million and a return of 1.3 times cost; and -- Innovation Broking Group generated proceeds of GBP0.9 million and a return of 10.3 times cost.
Further details of other realisations during the year can be found in the table in the Portfolio of Investments on pages 25 and 26 of the full Annual Report and Financial Statements.
There were net valuation gains on investments of GBP21.6 million in the year, an increase from GBP10.2 million in the previous year. The key contributors were the uplifts on Quantexa (GBP7.7 million) and Oviva (GBP2.5 million), both of which have been revalued after further externally led funding rounds and Egress Software Technologies (GBP2.4 million) and Proveca (GBP0.6 million), both of which continue to grow. However, our investments in Mirada Medical, Concirrus and Avora were written down following difficult trading conditions, in part because of the Covid-19 pandemic. We have also written-off our investment in Xperiome which went into administration.
The Company has been an active investor during the year with GBP9.0 million invested in new and existing companies. The Company has invested GBP2.8 million in six new portfolio companies, all of which are targeted to require further investment as the companies prove themselves and grow:
-- GBP0.8 million into NuvoAir Holdings, a provider of digital therapeutics and decentralised clinical trials for respiratory conditions; -- GBP0.8 million into Gravitee Topco (trading as Gravitee.io), an application programming interface (API) management platform; -- GBP0.5 million into Perchpeek, a digital relocation platform; -- GBP0.3 million into Brytlyt, which uses patented software and artificial intelligence (AI), combined with the superior computation power of graphics processing units (GPUs), to derive insights thousands of times faster than legacy systems; -- GBP0.3 million into Accelex Technology, a data extraction and analytics technology for private capital markets; and -- GBP0.1 million into Regulatory Genome Development, a provider of machine readable structured regulatory content.
A further GBP6.2 million was invested into 16 existing portfolio companies, of which the largest were: GBP1.4 million into Oviva; GBP0.7 million into TransFICC; and GBP0.5 million each into Seldon Technologies, uMotif and Black Swan Data.
A review of business and future prospects is included in the Strategic report below.
A full list of the Company's investments and disposals, including their movements in value for the year, can be found in the Portfolio of investments on pages 25 and 26 of the full Annual Report and Financial Statements.
Risks and uncertainties
In addition to the risks around Covid-19, which have been a major factor for the past 2 years, the UK is experiencing its highest level of inflation in decades, as well as the uncertainty over the future course and global impact of Russia's invasion of Ukraine. Our investment portfolio, while concentrated mainly in the technology and healthcare sectors, remains diversified in terms of both sub-sector and stage of maturity and, importantly, we believe to be appropriately valued. While we would expect these valuations to be robust within the tolerance of normal market fluctuations, the potential but unknown, scale of any further adverse events arising out of the Ukraine invasion remain a major risk factor.
A detailed analysis of the other risks and uncertainties facing the business is shown in the Strategic report below.
Sunset Clause
In 2015 a VCT "sunset clause" was introduced as a requirement of an EU state aid notification. This provides that income tax relief will no longer be given to subscriptions made on or after 6 April 2025, unless the legislation is amended to make the scheme permanent or the "sunset clause" is extended. Our Manager, Albion Capital, is working, alongside the VCT industry, to demonstrate to Government the importance of VCTs as a source of early stage capital to support entrepreneurs creating innovative growth businesses employing thousands of people throughout the UK. Given its importance, the Board expects that the VCT scheme will continue to attract Government support.
Board composition
On 1 September 2021, Pippa Latham joined the Board. Pippa brings extensive experience across the financial sector as well as Board membership of a variety of successful technology and other commercial organisations. She is a Cambridge graduate, holds an MBA from INSEAD and is both a qualified accountant and a member of the Institute of Chartered Secretaries and Administrators. The Board believes that Pippa will add considerable value during her tenure.
Share buy-backs
It remains the Board's policy to buy back shares in the market, subject to the overall constraint that such purchases are in the Company's interest. This includes the maintenance of sufficient cash resources for investment in new and existing portfolio companies and the continued payment of dividends to shareholders.
It is the Board's intention that such buy-backs should be at around a 5% discount to net asset value, in so far as market conditions and liquidity permit. The Board continues to review the use of buy-backs and is satisfied that it is an important means of providing market liquidity for shareholders.
Cancellation of share premium and capital redemption reserve
The Company obtained authority to cancel the amount standing to the credit of its share premium and capital redemption reserves at the General Meeting on 21 February 2022. The purpose of the proposal was to increase the distributable reserves available to the Company for the payment of dividends, the buy-back of shares, and for other corporate purposes.
The proposal received the consent of the Court on 22 March 2022, and the changes have been registered at Companies House on 31 March 2022. Over time, this will create additional distributable reserves of GBP66.2 million.
Albion VCTs Prospectus Top Up Offers
Your Board, in conjunction with the boards of the other five VCTs managed by Albion Capital Group LLP, launched a prospectus top up offer of new Ordinary shares on 6 January 2022. The Board announced on 22 March 2022 that, following strong demand, it would utilise part of its over-allotment facility, bringing the total to be raised to GBP21.5 million. The Offer was fully subscribed and closed to further applications on 24 March 2022.
The proceeds are being used to provide support to our existing portfolio companies and to enable us to take advantage of new investment opportunities. Details of share allotments made during and after the financial year end can be found in notes 15 and 19 respectively.
Annual General Meeting ("AGM")
Based on the success of last year's live webcast AGM, the Board has decided to adopt a virtual format for the AGM again this year. The AGM will be held at noon on 30 August 2022 via the Lumi platform. Information on how to participate in the live webcast can be found on the Manager's website https://www.globenewswire.com/Tracker?data=4mmOZ3WqIZA_arrDGUddW4fRfMe1cleGkPd4PInV9FNEN2AVyvTg5tzfu3Uvn_9FSA7o74ujbgK0lE7XiW0bX9ZYSdc1ngLrFVUMHH9mEXMs8PO2ORVJqHdSeNoxJA-EOK3avju8egv_wcQl1gsTDA== www.albion.capital/vct-hub/agms-events.
The Board welcome questions from shareholders at the AGM and shareholders will be able to ask questions using the Lumi platform during the AGM. Alternatively, shareholders can email their questions to https://www.globenewswire.com/Tracker?data=zh83woSBLpyYbktiudgoVkyNoWMkk2mVboeQaDpDaoWIlvZv-4suoUwxXfWW8WeM23seImHC9hiyqw-xDXY-mhOfbmtCOdulhFotW6PneV0= AAEVchair@albion.capital prior to the AGM.
Shareholders' views are important, and the Board encourages shareholders to vote on the resolutions.
Further details on the format and business to be conducted at the AGM can be found in the Directors' report on pages 36 and 37 and in the Notice of the Meeting on pages 72 to 75 of the full Annual report and Financial Statements.
Outlook and prospect
These positive results demonstrate the resilience of our portfolio of companies which are at different stages of maturity and targeted at sectors such as software and healthcare. These are companies which provide products and services that are considered innovative and essential to their customers. I am confident that our portfolio companies are well positioned to grow, despite the considerable uncertainty around the longer-term impact of the pandemic, high levels of inflation, and an increasingly volatile geopolitical backdrop. The Board believes the Company is well placed to continue to deliver long term value to our shareholders, though remains mindful of the considerably uncertain economic outlook.
Maxwell Packe
Chairman
30 June 2022
Strategic report
Investment policy
The Company will invest in a broad portfolio of higher growth businesses across a variety of sectors of the UK economy including higher risk technology companies. Allocation of assets will be determined by the investment opportunities which become available but efforts will be made to ensure that the portfolio is diversified both in terms of sector and stage of maturity of company.
The full investment policy can be found above.
Current portfolio sector allocation
The pie charts at the end of this announcement show the split of the portfolio valuation on 31 March 2022 by: sector; stage of investment; and number of employees. This is a useful way of assessing how the Company and its portfolio is diversified across sector, portfolio companies' maturity measured by revenues and their size measured by the number of people employed. As the Company continues to invest in software and other technology companies, FinTech (which is technology specifically applicable to financial services companies) is included as a subsector below due to its prominence. Details of the principal investments made by the Company are shown in the Portfolio of investments on pages 25 and 26 of the full Annual Report and Financial Statements.
Direction of portfolio
The portfolio remains well-balanced across the different sectors of FinTech, Healthcare and other Software & Technology. The renewable energy investments whilst maintaining their value during the year, are reducing as a percentage of the portfolio as the net asset value of the Company has been increasing over recent years. Cash and other net assets is relatively high at 32%, but this is a result of the recent fundraise, as well as the disposal of three of our portfolio companies in March 2022. These funds will continue to be invested predominantly into higher growth technology companies and the Manager has outlined to the Board a pipeline of new and follow-on investments where it aims to deploy cash over the next 12 months. The Company has a significant speciality in FinTech investing, which can be seen as a growing part of the portfolio, represented by a 3% increase this year.
Results and dividend policy
GBP'000
Net capital return for the year ended 31 March 2022 17,940
Net revenue return for the year ended 31 March 2022 141
Total return for the year ended 31 March 2022 18,081
Dividend of 2.87 pence per share paid on 31 August
2021 (2,139)
Dividend of 3.22 pence per share paid on 28 February
2022 (2,391)
Reclaimed dividends 2
-------
Transferred to reserves 13,553
-------
Net assets on 31 March 2022 118,415
=======
Net asset value on 31 March 2022 (pence per share) 132.28
===================================================== =======
The Company paid dividends totalling 6.09 pence per share during the year ended 31 March 2022 (2021: 5.44 pence per share). The Board has declared a first dividend for the year ending 31 March 2023, of 3.31 pence per Ordinary share to be paid on 31 August 2022 to shareholders on the register on 5 August 2022.
As shown in the Company's Income statement below, the total return for the year was 23.97 pence per share (2021: 13.45 pence per share). Investment income increased to GBP886,000 (2021: GBP543,000), This is a result of Radnor House repaying the previously capitalised interest and the Evewell Group Limited paying interest. Consequently, there is a net revenue gain to shareholders of GBP141,000 (2021: loss of GBP349,000). In addition, the total return has benefitted from the increased percentage of investment management fees and performance incentive fees allocated to the realised capital reserve, to better align with the Board's expectation that over the long term the majority of the Company's investment returns will be in the form of capital gains. Further information can be found in the Notes to the Financial Statements below.
The capital return on investments for the year of GBP21,636,000 (2021: GBP10,892,000) has been explained in the Chairman's statement above. This has led to a significant increase in net asset value to 132.28 pence per share (2021: 114.60 pence per share), which can be seen on the Balance sheet below. This increase in net asset value is after taking account of the payment of 6.09 pence per share of dividends during the year.
There was a net cash inflow for the Company of GBP5,123,000 for the year (2021: GBP2,919,000), which has arisen from both the disposal of fixed asset investments and the issue of Ordinary shares under the Albion VCTs Top Up Offers, reduced by the investment in fixed asset investments, dividends paid, operating expenses and the buy back of shares.
Review of business and future changes
A detailed review of the Company's business during the year is contained in the Chairman's statement above. Total gains on investments for the year were GBP21.6 million (2021: GBP10.9 million).
There is a continuing focus on growing the FinTech, healthcare and other software and technology sectors. The majority of these investment returns are delivered through equity and capital gains, and we expect our investment income to continue to be similar to the current level.
Details of significant events which have occurred since the end of the financial year are listed in note 19. Details of transactions with the Manager are shown in note 5.
Future prospects
The Company's financial results for the year demonstrates that the portfolio remains well balanced across sectors and risk classes, and has largely weathered the pandemic so far. Although there remains much uncertainty, the Manager has a strong pipeline of investment opportunities in which the Company's cash can be deployed. The Board considers that the current portfolio and the pipeline of opportunities should enable the Company to maintain a predictable stream of dividend payments to shareholders, as well as delivering long term growth for shareholders.
Key performance indicators ("KPIs") and Alternative Performance Measures ("APMs")
The Directors believe that the following KPIs (some of which are APMs), which are typical for Venture Capital Trusts, used in its own assessment of the Company, will provide shareholders with sufficient information to assess how effectively the Company is applying its investment policy to meet its objectives. The Directors are satisfied that the results shown in the following KPIs and APMs give a good indication that the Company is achieving its investment objective and policy. These are:
1. Total shareholder value relative to FTSE All Share Index total return
The graph on page 4 of the full Annual report and Financial Statements shows the Company's total shareholder value relative to the FTSE All-Share Index total return, with dividends reinvested. The FTSE All-Share index is considered a reasonable benchmark as the Company is classed as a generalist UK VCT investor, and this index includes over 600 companies listed in the UK, including small-cap, covering a range of sectors. Details on the performance of the net asset value and return per share for the year are shown in the Chairman's statement above.
2. Net asset value per share and total shareholder value
Total shareholder value increased by 23.77 pence per share to 194.66 pence per share for the year ended 31 March 2022 (return of 20.74% on opening net asset value).
3. Shareholder return in the year
The graph on page 5 of the full Annual report and Financial Statements shows the Company's total shareholder return over the previous ten years, five years, three years and the past year, and the annual returns for the same period are detailed below.
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 ----- ---- ---- ---- ----- ----- ----- ------ ----- ----- 13.5% 9.7% 4.5% 5.4% 10.8% 12.4% 13.1% (4.4)% 12.7% 20.7% ----- ---- ---- ---- ----- ----- ----- ------ ----- -----
Methodology: Shareholder return is calculated by the movement in total shareholder value for the year divided by the opening net asset value.
4. Dividend distributions
Dividends paid in respect of the year ended 31 March 2022 were 6.09 pence per share (2021: 5.44 pence per share), a yield of 5.3% on opening net asset value. The cumulative dividends paid since inception total 62.38 pence per share.
5. Ongoing charges
The ongoing charges ratio for the year ended 31 March 2022 was 2.50% (2021: 2.50%). The ongoing charges ratio has been calculated using The Association of Investment Companies' (AIC) recommended methodology. This figure shows shareholders the total recurring annual running expenses (including investment management fees charged to capital reserve) as a percentage of the average net assets attributable to shareholders. The ongoing charges cap is 2.50%, which has resulted in a saving of GBP22,000 to shareholders during the year (2021: GBP53,000).
6. VCT compliance*
The investment policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HMRC. In order to maintain its status under Venture Capital Trust legislation, a VCT must comply on a continuing basis with the provisions of Section 274 of the Income Tax Act 2007, details of which are provided in the Directors' report on page 34 of the full Annual report and Financial Statements.
The relevant tests to measure compliance have been carried out and independently reviewed for the year ended 31 March 2022. These showed that the Company has complied with all tests and continues to do so.
*VCT compliance is not a numerical measure of performance and thus cannot be defined as an APM.
Gearing
As defined by the Articles of Association, the Company's maximum exposure in relation to gearing is restricted to 10% of its adjusted share capital and reserves. The Directors do not currently have any intention to utilise gearing for the Company.
Operational arrangements
The Company has delegated the investment management of the portfolio to Albion Capital Group LLP, the Manager, which is authorised and regulated by the Financial Conduct Authority. The Manager also provides company secretarial and other accounting and administrative support to the Company.
Management agreement
Under the Management agreement, the Manager provides investment management, secretarial and administrative services to the Company. The Management agreement can be terminated by either party on 12 months' notice. The Management agreement is subject to earlier termination in the event of certain breaches or on the insolvency of either party. The Manager is paid an annual fee equal to 2% of the net asset value of the Company paid quarterly in arrears, along with an administration fee of 0.2% of the net asset value.
Total annual expenses, including the management fee, are limited to 2.50% of the net asset value.
In some instances, the Manager is entitled to an arrangement fee, payable by a portfolio company in which the Company invests, in the region of 2.0% of the investment made, and also monitoring fees where the Manager has a representative on the portfolio company's board.
Further details on the management fee can be found in note 5.
Management performance incentive fee
In order to align the interests of the Manager and the shareholders with regards to generating positive returns, the Company has a Management performance incentive arrangement with the Manager. Under the incentive arrangement, the Company will pay an incentive fee to the Manager of an amount equal to 20% of such excess return that is calculated for each financial year.
The performance fee hurdle requires that the growth of the aggregate of the net asset value per share and dividends paid by the Company compared with the previous accounting date exceeds the higher of the average base rate of the Royal Bank of Scotland plus 2% or RPI plus 2%. The hurdle is calculated every year, based on the starting rate of 100 pence per share in 2007.
For the year ended 31 March 2022, the total return of the Company since launch (the performance incentive fee start date) amounted to 194.66 pence per share, compared to the higher hurdle of 181.85 pence per share. As a result, a performance incentive fee of GBP1,934,000 is payable to the Manager (2021: GBP288,000).
Evaluation of the Manager
The Board has evaluated the performance of the Manager based on:
-- the returns generated by the Company; -- the continuing achievement of the 80% qualifying holdings investment requirement for VCT status; -- the long term prospects of the current portfolio of investments; -- the management of treasury, including use of buy-backs and participation in fund raising; -- a review of the Management agreement and the services provided therein; and -- benchmarking the performance of the Manager to other service providers including the performance of other VCTs that the Manager is responsible for managing.
The Board believes that it is in the interests of shareholders as a whole, and of the Company, to continue the appointment of the Manager for the forthcoming year.
Alternative Investment Fund Managers Directive ("AIFMD")
The Board appointed the Manager as the Company's AIFM in 2014 as required by the AIFMD. The Manager is a full-scope Alternative Investment Fund Manager under the AIFMD. Ocorian Depositary (UK) Limited is the appointed Depositary and oversees the custody and cash arrangements and provides other AIFMD duties with respect to the Company.
Companies Act 2006 Section 172 Reporting
Under Section 172 of the Companies Act 2006, the Board has a duty to promote the success of the Company for the benefit of its members as a whole in both the long and short term, having regard to the interests of other stakeholders in the Company, such as suppliers, and to do so with an understanding of the impact on the community and environment and with high standards of business conduct, which includes acting fairly between members of the Company.
The Board is very conscious of these wider responsibilities in the ways it promotes the Company's culture and ensures, as part of its regular oversight, that the integrity of the Company's affairs is foremost in the way the activities are managed and promoted. This includes regular engagement with the wider stakeholders of the Company and being alert to issues that might damage the Company's standing in the way that it operates. The Board works very closely with the Manager in reviewing how stakeholder issues are handled, ensuring good governance and responsibility in managing the Company's affairs, as well as visibility and openness in how the affairs are conducted.
The Company is an externally managed investment company with no employees, and as such has nothing to report in relation to employee engagement but does keep close attention to how the Board operates as a cohesive and competent unit. The Company also has no customers in the traditional sense and, therefore, there is also nothing to report in relation to relationships with customers.
The table below sets out the stakeholders the Board considers most relevant, details how the Board has engaged with these key stakeholders and the effect of these considerations on the Company's decisions and strategies during the year.
Stakeholders Engagement with Stakeholders Decision outcomes based on engagement
------------ ------------------------------------------------------------- -----------------------------------------------------------
Shareholders The key methods of engaging with Shareholders are -- Shareholders' views are important and the Board
as follows: encourages Shareholders to exercise their right to
-- Annual General Meeting ("AGM") vote on the resolutions at the AGM. The Company's AGM
is typically used as an opportunity to communicate
-- Shareholder seminar with investors, including through a presentation made
by the investment management team. In light of the
-- Annual report and Financial Statements, Half-yearly Covid-19 pandemic, the Board took the decision to
financial report, and Interim management statements update the Company's articles of Association to allow
for virtual/hybrid events in order for the 2021 AGM
-- RNS announcements for all key decisions including to be live streamed for Shareholders. The Board was
appointment of a new Director, and the publication of able to take questions from Shareholders at the AGM
a Prospectus enabling maximum shareholder engagement in the
absence of a face-to-face event. Following last
-- Website redesigned in the year to make it more user year's success and the overwhelming positive feedback
accessible from shareholders, the Board has decided that this
year's AGM will again be held as a virtual event to
facilitate shareholder participation.
-- Shareholders are also encouraged to attend the annual
Shareholders' Seminar. Last year's event took place
on 12 November 2021. The seminar included Quantexa
and Healios sharing insights into their businesses
and also presentations from Albion executives on some
of the key factors affecting the investment outlook,
as well as a review of the past year and the plans
for the year ahead. Representatives of the Board
attend the seminar. The Board considers this an
important interactive event, and invites shareholders
to attend this year's event scheduled for 23 November
2022 at the Royal College of Surgeons. To reserve a
place, email info@albion.capital
mailto:info@albion.capital .
-- The Board recognises the importance to Shareholders
of maintaining a share buy-back policy, in order to
provide market liquidity, and considered this when
establishing the current policy. The Board closely
monitors the discount to the net asset value to
ensure this is in the region of 5%.
-- The Board seeks to create value for Shareholders by
generating strong and sustainable returns to provide
shareholders with regular dividends and the prospect
of capital growth. The Board takes this into
consideration when making the decision to pay
dividends to Shareholders. The variable dividend
policy has been enacted, and has resulted in a
dividend yield of 5.3% on opening net asset value.
-- During the year, the decision to publish a Prospectus
was taken, in order to raise more funds for
deployment into new and existing portfolio companies.
The Board carefully considered whether further funds
were required, whether the VCT tests would continue
to be met, and whether it would be in the interest of
Shareholders, before agreeing to publish the
Prospectus. On allotment, an issue price formula
based on the prevailing net asset value was used to
ensure there was no dilution to existing
Shareholders.
-- Cash management and liquidity of the Company are key
quarterly discussions amongst the Board, with focus
on deployment of cash for future investments,
dividends and share buy-backs.
-- The Board decided to hold a General Meeting on 21
February 2022 to propose a special resolution to
increase the Company's distributable reserves by way
of a reduction of share premium account and capital
redemption reserve. This resolution was approved with
99.3% of Shareholders voting in favour of the
resolution.
------------ ------------------------------------------------------------- -----------------------------------------------------------
Suppliers The key suppliers are:
-- Corporate broker -- The Manager is in regular contact with the suppliers
and the contractual arrangements with all the
-- VCT taxation adviser principal suppliers to the Company are reviewed
regularly and formally once a year, alongside the
-- Depositary performance of the suppliers in acquitting their
responsibilities.
-- Registrar
-- The Board reviews the performance of the providers
-- Auditor annually in line with the Manager and was satisfied
with their performance.
-- Lawyer
------------ ------------------------------------------------------------- -----------------------------------------------------------
Manager The performance of Albion Capital Group LLP is essential -- The Manager meets with the Board at least quarterly
to the long term success of the Company, including to discuss the performance of the Company, and is in
achieving the investment policy and generating returns regular contact in between these meetings, e.g. to
to shareholders, as well as the impact the Company share investment papers for new and follow on
has on Environment, Social and Governance practice. investments. All strategic decisions are discussed in
detail and minuted, with an open dialogue between the
Board and the Manager.
-- The performance of the Manager in managing the
portfolio and in providing company secretarial,
administration and accounting services is reviewed in
detail each year, which includes reviewing comparator
engagement terms and portfolio performance. Further
details on the evaluation of the Manager, and the
decision to continue the appointment of the Manager
for the forthcoming year, can be found in this
report.
-- During the year, the Board has reviewed the current
Management Agreement, and a new agreement was signed
which updated the agreement for new regulatory
requirements, such as GDPR and AIFMD, but did not
change any commercial terms with the Manager.
-- Details of the Manager's responsibilities can be
found in the Statement of corporate governance on
page 40 of the full Annual report and Financial
Statements.
------------ ------------------------------------------------------------- -----------------------------------------------------------
Portfolio The portfolio companies are considered key stakeholders, -- The Board aims to have a diversified portfolio in
companies not least because they are principal drivers of value terms of sector and stage of investment. Further
for the Company. However, as discussed in the Environmental, details of this can be found in the pie charts at the
Social and Governance ("ESG") section on pages 19 end of this announcement.
to 21 of the full Annual report and Financial Statements, -- In most cases, an Albion executive has a place on the
the portfolio companies' impact on their stakeholders board of a portfolio company, in order to help with
is also important to the Company. both business operation decisions, as well as good
ESG practice.
-- The Manager ensures good dialogue with portfolio
companies, and often puts on events in order to help
portfolio companies benefit from the Albion network.
------------ ------------------------------------------------------------- -----------------------------------------------------------
Community The Company, with no employees, has no effect itself -- The Board receives reports on ESG factors within its
and on the community and environment. However, as discussed portfolio from the Manager as it is a signatory of
environment above, the portfolio companies' ESG impact is extremely the UN Principles for Responsible Investment ("UN
important to the Board. PRI"). Further details of this are set out in the ESG
report pages 19 to 21 of the full Annual report and
Financial Statements. ESG, without its specific
definition, has always been at the heart of the
responsible investing that the Company engages in and
in how the Company conducts itself with all of its
stakeholders.
------------ ------------------------------------------------------------- -----------------------------------------------------------
Environmental, Social, and Governance ("ESG") report
The Board and the Company's Manager, Albion Capital Group LLP, take ESG very seriously and more detail can be found on this in the ESG report on pages 19 to 21 of the full Annual report and Financial Statements.
Social and community issues, employees and human rights
The Board recognises the requirement under section 414C of the Act to detail information about social and community issues, employees and human rights; including any policies it has in relation to these matters and effectiveness of these policies. As an externally managed investment company with no employees, the Company has no formal policies in these matters, however, it is at the core of its responsible investment strategy as detailed above.
Further policies
The Company has adopted a number of further policies relating to:
-- Environment -- Global greenhouse gas emissions -- Anti-bribery -- Anti-facilitation of tax evasion -- Diversity
and these are set out in the Directors' report on page 35 of the full Annual report and Financial Statements.
General Data Protection Regulation
The General Data Protection Regulation has the objective of unifying data privacy requirements across the European Union. GDPR forms part of the UK law after Brexit, now known as UK GDPR. The Manager continues to take action to ensure that the Manager and the Company are compliant with the regulation.
Risk management
The Board carries out a regular review of the risk environment in which the Company operates, together with changes to the environment and individual risks. The Board also identifies emerging risks which might impact on the Company. In the period the most noticeable risks have been the global pandemic and the invasion of Ukraine which have impacted not only public health and mobility but also had an adverse impact on the economy, the full impact of which is likely to be uncertain for some time.
The Board has carried out a robust assessment of the Company's principal risks and uncertainties and seeks to mitigate these risks through regular reviews of performance and monitoring progress and compliance. The Board applies the principles detailed in the Financial Reporting Council's Guidance on Risk Management, Internal Control and Related Financial and Business Reporting, in the mitigation and management of these risks. More information on specific mitigation measures for the principal risks and uncertainties are explained below:
Risk Possible consequence Risk assessment during the year Risk management
------------------------------------------------------ ---------------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------------------
Investment, performance and valuation risk Investment in smaller unquoted growth businesses carries Incremental increase in the period due to the interrelated Although this risk category has increased, it is a
a higher degree of risk and is more volatile than economic and geopolitical issues referred to in the central part of the Company's business model to invest
investing in larger, long-established businesses. Chairman's statement. in higher growth businesses which, by their very nature
This could negatively impact shareholder returns. have a heightened risk profile. In this regard, the
The Company relies on the judgement and reputation Board places reliance upon the skills and expertise
of the Manager to provide strong investment returns of the Manager and its track record of making successful
and valuations for shareholders. investments in higher growth technology businesses.
The Company's investment valuation methodology is The Manager operates a structured investment appraisal
based on fair value, which for smaller unquoted growth and due diligence process. This includes a review
businesses can be difficult to determine due to the from one external investment professional and comments
lack of observable market data and the limitation from non-executive Directors of the Company on matters
of external reference points. discussed at the Investment Committee meetings. In
response to the heightened risk, the Manager undertook
additional measures to assess the cash requirements
of its portfolio companies to ensure sufficient runway
over the next 24 months.
Investments are monitored by the Manager through monthly
portfolio updates and typically an investment manager
sitting on portfolio company boards. The Board receives
detailed reports on each investment and their valuation
as part of their quarterly board meetings.
Review and oversight of the non-executive Directors
ensures that the risk to the Company's and Manager's
reputation is kept to a minimum.
Investments are valued in accordance with the International
Private Equity and Venture Capital Valuation Guidelines,
which represent current best practice for investment
valuation and are reviewed by the Manager's Valuation
Committee.
------------------------------------------------------ ---------------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------------------
VCT approval and regulatory change risk Any breach of section 274 of the Income Tax Act 2007, No change. The Company's VCT qualifying status is monitored monthly
including any legislative changes, could result in by the Manager and quarterly by the Board. The Board
the loss of the Company's HMRC qualifying status and has appointed Philip Hare & Associates LLP as its
tax reliefs for investors. taxation adviser, who independently confirms compliance,
highlights areas of risk and informs on any legislative
changes, including those which may arise from the
withdrawal from the European Union.
------------------------------------------------------ ---------------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------------------
Regulatory and compliance risk The Company is listed on The London Stock Exchange No change. The Board and the Manager receive regular updates
and is required to comply with the rules of the UK on new regulation, including legislation on the management
Listing Authority, as well as with the Companies Act, of the Company, from its auditor, lawyers and other
Accounting Standards and other legislation. Failure professional bodies. The Company is subject to compliance
to comply with these regulations could result in a checks through the Manager's compliance officer, and
delisting of the Company's shares, or other penalties any issues arising from compliance or regulation are
under the Companies Act or from financial reporting reported to its own board on a monthly basis. The
oversight bodies. Board
ensures the Company is compliant as part of its quarterly
Board meetings.
The Board reviews the quarterly reports prepared by
Ocorian Depositary (UK) Limited (the Company's Depositary)
to ensure the Manager is adhering to the AIFMD requirements.
------------------------------------------------------ ---------------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------------------
Operational and internal control risk (including cyber The Company relies on a number of third parties, in No change. The Company operations and IT systems are subject
and data security) particular the Manager, for the provision of investment to rigorous internal controls which are reviewed on
management and administrative functions. Failures a regular basis and reported to the Board.
in key systems and controls within the Manager's business The Audit Committee reviews the Internal Audit Reports
could put assets of the Company at risk, resulting prepared by the Manager's internal auditors, Azets
in inaccurate information being passed to the Board and has access to their internal audit partner to
or to shareholders. This could additionally result whom it can ask specific detailed questions in order
in losses for the Company and its shareholders. to satisfy itself that the Manager has strong systems
and controls in place including those in relation
to risk management, business continuity and cyber
security.
The Board reviews the systems and processes (including
cyber and data security) in place for the Company's
key suppliers to ensure that there is an appropriate
risk mitigation in place.
------------------------------------------------------ ---------------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------------------
Economic and political risk Events such as the Covid-19 pandemic, the impact of Increased (due to high levels of inflation and the The Company invests in a diversified portfolio of
Brexit, an economic recession, fluctuation in inflation geopolitical risks from the invasion of Ukraine). c.50 companies, predominantly in the United Kingdom,
and interest rates, or significant political events and has a policy of minimising any external bank borrowings
could adversely affect the companies within the portfolio within portfolio companies.
and consequently the Company's net asset value. Exogenous risks over which the Company has no control
are always a risk and the Company does what it can
to address these risks. The inherent long-term nature
of the portfolio helps to mitigate these exogenous
risks.
The Board and Manager are continuously assessing the
resilience of the portfolio as a result of the ongoing
economic and political risks, to ascertain where support
is required. The Company has sufficient cash resources
to cope with any such exigent and unexpected pressures.
Exposure is relatively small to at-risk sectors that
include leisure, hospitality, retail and travel (1%
of NAV).
The Company's investment policy and the Board's scrutiny
of the investment portfolio ensures that this increased
risk continues to be mitigated where possible.
------------------------------------------------------ ---------------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------------------
Liquidity risk The Company may not have sufficient cash available No change. The Board reviews the Company's three year cash flow
to meet its financial obligations. forecasts on a quarterly basis. These include potential
The Company's portfolio is primarily in smaller unquoted investment realisations (which are closely monitored
companies, which are inherently illiquid as there by the Manager), Top Up Offers, dividend payments
is no readily available market, and thus it may be and operational expenditure. This ensures that there
difficult to realise their fair value at short notice. are sufficient cash resources available for the Company's
liabilities as they fall due.
------------------------------------------------------ ---------------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------------------
Environmental, social and governance ("ESG") risk An insufficient ESG policy could lead to an increased Increased (due to the new guidance issued on climate The Manager is a signatory of the UN PRI and the Board
negative impact on the environment, including the change reporting and increased importance to stakeholders). is kept appraised of the evolving ESG policies at
Company's carbon footprint. quarterly Board meetings.
Non-compliance with reporting requirements could lead Full details of the specific procedures and risk mitigation
to a fall in demand from investors, reputational damage can be found in the ESG report on pages 19 to 21 of
and penalties. the full Annual report and Financial Statements.
These procedures ensure that this increased risk continues
to be mitigated where possible.
------------------------------------------------------ ---------------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------------------
Viability statement
In accordance with the FRC UK Corporate Governance Code published in 2018 and principle 36 of the AIC Code of Corporate Governance, the Directors have assessed the prospects of the Company over three years to 31 March 2025. The Directors believe that three years is a reasonable period in which they can assess the future of the Company to continue to operate and meet its liabilities as they fall due. This is the period used by the Board as part of its strategic planning process, which includes: the estimated timelines for finding, assessing and completing investments; the potential impact of any new regulations; and the availability of cash.
The Board has carried out a robust assessment of the emerging and principal risks facing the Company, including those that could threaten its business model, future performance, solvency or liquidity and focused on the major factors which affect the economic, regulatory and political environment. The Board carefully assessed, and were satisfied with, the risk management processes in place to avoid or reduce the impact of these risks. The Board has carried out robust stress testing of cashflows which included; assessing the resilience of portfolio companies, including the requirement for any future financial support, and evaluating the impact of high inflation, both within the Company and within its portfolio.
The Board has additionally considered the ability of the Company to comply with the ongoing conditions to ensure it maintains its VCT qualifying status under its current investment policy. As a result of the Board's quarterly valuation reviews, it has concluded that the portfolio is well balanced and geared towards delivering long term growth and strong returns to shareholders.
The Board has concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period to 31 March 2025. The Board is mindful of the ongoing risks and will continue to ensure that appropriate safeguards are in place, in addition to monitoring the quarterly cashflow forecasts to ensure the Company has sufficient liquidity.
This Strategic report of the Company for the year ended 31 March 2022 has been prepared in accordance with the requirements of section 414A of the Companies Act 2006 (the "Act"). The purpose of this report is to provide shareholders with sufficient information to enable them to assess the extent to which the Directors have performed their duty to promote the success of the Company in accordance with Section 172 of the Act.
For and on behalf of the Board
Maxwell Packe
Chairman
30 June 2022
Responsibility Statement
In preparing these financial statements for the year ended 31 March 2022, the Directors of the Company, being Maxwell Packe, Christopher Burrows, Philippa Latham, Patrick Reeve, and Rhodri Whitlock confirm that to the best of their knowledge:
-- summary financial information contained in this announcement and the full
Annual Report and Financial Statements for the year ended 31 March 2022
for the Company has been prepared in accordance with United Kingdom
Generally Accepted Accounting Practice (UK Accounting Standards and
applicable law) and give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company; and
-- the Chairman's statement and Strategic report include a fair review of
the development and performance of the business and the financial
position of the Company, together with a description of the principal
risks and uncertainties it faces.
We consider that the Annual Report and Financial Statements, taken as a whole, are fair, balanced, and understandable and provide the information necessary for shareholders to assess the Company's position, performance, business model and strategy.
A detailed "Statement of Directors' responsibilities" is contained on page 38 within the full audited Annual Report and Financial Statements.
On behalf of the Board,
Maxwell Packe
Chairman
30 June 2022
Income statement
Year ended Year ended
31 March 2022 31 March 2021
----------------------------------------------------------- ---- ------------------------- -------------------------
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---- ------- ------- ------- ------- ------- -------
Gains on investments 3 - 21,636 21,636 - 10,892 10,892
Investment income 4 886 - 886 543 - 543
Investment Manager's fees* 5 (196) (3,696) (3,892) (438) (1,314) (1,752)
Other expenses 6 (549) - (549) (454) - (454)
------- ------- ------- ------- ------- -------
Return/(loss) on ordinary activities before taxation 141 17,940 18,081 (349) 9,578 9,229
Tax on ordinary activities 8 - - - - - -
------- ------- ------- ------- ------- -------
Return/(loss) and total comprehensive income attributable
to shareholders 141 17,940 18,081 (349) 9,578 9,229
------- ------- ------- ------- ------- -------
Basic and diluted return/(loss) per share (pence)** 10 0.19 23.78 23.97 (0.51) 13.96 13.45
------- ------- ------- ------- ------- -------
*For more information on the allocation between revenue and capital please see the accounting policies below.
* adjusted for treasury shares
The accompanying notes below form an integral part of these Financial Statements.
The total column of this Income statement represents the profit and loss account of the Company. The supplementary revenue and capital columns have been prepared in accordance with The Association of Investment Companies' Statement of Recommended Practice.
Balance sheet
31 March 31 March
2022 2021
Note GBP'000 GBP'000
---------------------------------------------------- ---- -------- --------
Fixed asset investments 11 80,842 60,615
Current assets
Trade and other receivables 13 10,725 1,772
Cash and cash equivalents 29,552 24,429
-------- --------
40,277 26,201
-------- --------
Total assets 121,119 86,816
Payables: amounts falling due within one year
Trade and other payables less than one year 14 (2,704) (1,418)
-------- --------
Total assets less current liabilities 118,415 85,398
-------- --------
Equity attributable to equity holders
Called-up share capital 15 1,017 852
Share premium 8,278 53,258
Capital redemption reserve - 104
Unrealised capital reserve 32,790 17,538
Realised capital reserve 17,416 14,728
Other distributable reserve 58,914 (1,082)
-------- --------
Total equity shareholders' funds 118,415 85,398
-------- --------
Basic and diluted net asset value per share (pence)
* 16 132.28 114.60
---------------------------------------------------- ---- -------- --------
* excluding treasury shares
The accompanying notes below form an integral part of these Financial Statements.
These Financial Statements were approved by the Board of Directors, and were authorised for issue on 30 June 2022 and were signed on its behalf by
Maxwell Packe
Chairman
Company number: 05990732
Statement of changes in equity
Called-up Unrealised Realised
share Share capital capital Other distributable
capital premium Capital redemption reserve reserve reserve* reserve* Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------- --------- -------- --------------------------- ---------- --------- ------------------- --------
On 1 April 2021 852 53,258 104 17,538 14,728 (1,082) 85,398
Return and total comprehensive income for the year - - - 17,239 701 141 18,081
Transfer of previously unrealised gains on disposal
of investments - - - (1,987) 1,987 - -
Issue of equity 165 21,638 - - - - 21,803
Cost of issue of equity - (544) - - - - (544)
Reduction of share premium and capital redemption
reserve - (66,074) (104) - - 66,178 -
Purchase of own shares for treasury - - - - - (1,795) (1,795)
Dividends paid - - - - - (4,528) (4,528)
On 31 March 2022 1,017 8,278 - 32,790 17,416 58,914 118,415
----------------------------------------------------- --------- -------- --------------------------- ---------- --------- ------------------- --------
On 1 April 2020 770 44,183 104 8,636 14,052 4,808 72,553
Return/(loss) and total comprehensive income for the
year - - - 8,836 742 (349) 9,229
Transfer of previously unrealised losses on disposal of investments - - - 66 (66) - - Issue of equity 82 9,277 - - - - 9,359 Cost of issue of equity - (202) - - - - (202) Purchase of own shares for treasury - - - - - (1,853) (1,853) Dividends paid - - - - - (3,688) (3,688) On 31 March 2021 852 53,258 104 17,538 14,728 (1,082) 85,398 ----------------------------------------------------- --------- -------- --------------------------- ---------- --------- ------------------- --------
* Included within these reserves is an amount of GBP37,334,000 (2021: GBP13,646,000) which is considered distributable. Over the next four years an additional GBP37,129,000 will become distributable. This is due to the HMRC requirement that the Company cannot use capital raised in the past three years to make a payment or distribution to shareholders. On 1 April 2022, GBP1,310,000 became distributable in line with this.
Statement of cash flows
Year ended Year ended
31 March 2022 31 March 2021
GBP'000 GBP'000
------------------------------------------- -------------- --------------
Cash flow from operating activities
Investment income received 826 434
Dividend income received - 94
Deposit interest received 3 17
Investment Manager's fees paid (2,084) (1,403)
Other cash payments (503) (465)
Net cash flow from operating activities (1,758) (1,323)
Cash flow from investing activities
Disposal of current asset investments - 3,691
Purchase of fixed asset investments (8,519) (7,324)
Disposal of fixed asset investments 9,379 3,683
Net cash flow from investing activities 860 50
Cash flow from financing activities
Issue of share capital 12,230 8,568
Cost of issue of equity (19) (17)
Dividends paid* (3,806) (3,094)
Purchase of own shares (including costs) (2,384) (1,265)
-------------- --------------
Net cash flow from financing activities 6,021 4,192
Increase in cash and cash equivalents 5,123 2,919
Cash and cash equivalents at start of the
year 24,429 21,510
-------------- --------------
Cash and cash equivalents at end of the year 29,552 24,429
* The dividends paid shown in the cash flow are different to the dividends disclosed in note 9 as a result of the non-cash effect of the Dividend Reinvestment Scheme.
Notes to the Financial Statements
1. Accounting convention
The Financial Statements have been prepared in accordance with applicable United Kingdom law and accounting standards, including Financial Reporting Standard 102 ("FRS 102"), and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" ("SORP") issued by The Association of Investment Companies ("AIC"). The Financial Statements have been prepared on a going concern basis and further details can be found in the Directors' report on pages 33 and 34 of the full Annual report and Financial Statements.
The preparation of the Financial Statements requires management to make judgements and estimates that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The most critical estimates and judgements relate to the determination of carrying value of investments at Fair Value Through Profit and Loss ("FVTPL") in accordance with FRS 102 sections 11 and 12. The Company values investments by following the International Private Equity and Venture Capital Valuation ("IPEV") Guidelines as updated in 2018 and further detail on the valuation techniques used are outlined in note 2 below.
Company information is shown on page 2 of the full Annual report and Financial Statements.
2. Accounting policies
Fixed asset investments
The Company's business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment policy, and information about the portfolio is provided internally on that basis to the Board.
In accordance with the requirements of section 9 of FRS 102, those undertakings in which the Company holds more than 20% of the equity as part of an investment portfolio are not accounted for using the equity method. In these circumstances the investment is measured at FVTPL.
Upon initial recognition (using trade date accounting) investments, including loan stock, are classified by the Company as FVTPL and are included at their initial fair value, which is cost (excluding expenses incidental to the acquisition which are written off to the Income statement).
Subsequently, the investments are valued at 'fair value', which is measured as follows:
-- Investments listed on recognised exchanges are valued at their bid prices
at the end of the accounting period or otherwise at fair value based on
published price quotations.
-- Unquoted investments, where there is not an active market, are valued
using an appropriate valuation technique in accordance with the IPEV
Guidelines. Indicators of fair value are derived using established
methodologies including earnings multiples, revenue multiples, the level
of third party offers received, cost or price of recent investment rounds,
net assets, discounted cash flows and industry valuation benchmarks.
Where price of recent investment is used as a starting point for
estimating fair value at subsequent measurement dates, this has been
benchmarked using an appropriate valuation technique permitted by the
IPEV guidelines.
-- In situations where cost or price of recent investment is used,
consideration is given to the circumstances of the portfolio company
since that date in determining fair value. This includes consideration of
whether there is any evidence of deterioration or strong definable
evidence of an increase in value. In the absence of these indicators, the
investment in question is valued at the amount reported at the previous
reporting date. Examples of events or changes that could indicate a
diminution include:
-- the performance and/or prospects of the underlying business are
significantly below the expectations on which the investment was
based;
-- a significant adverse change either in the portfolio company's
business or in the technological, market, economic, legal or
regulatory environment in which the business operates; or
-- market conditions have deteriorated, which may be indicated by a
fall in the share prices of quoted businesses operating in the
same or related sectors.
Investments are recognised as financial assets on legal completion of the investment contract and are de-recognised on legal completion of the sale of an investment.
Dividend income is not recognised as part of the fair value movement of an investment, but is recognised separately as investment income through the other distributable reserve when a share becomes ex-dividend.
Current assets and payables
Receivables (including debtors due after more than one year), payables and cash are carried at amortised cost, in accordance with FRS 102. Debtors due after more than one year meet the definition of a financing transaction held at amortised cost, and interest will be recognised through capital over the credit period using the effective interest method. There are no financial liabilities other than payables.
Investment income
Equity income
Dividend income is included in revenue when the investment is quoted ex-dividend.
Unquoted loan stock income
Fixed returns on non-equity shares and debt securities are recognised when the Company's right to receive payment and expect settlement is established. Where interest is rolled up and/or payable at redemption then it is recognised as income unless there is reasonable doubt as to its receipt.
Bank interest income
Interest income is recognised on an accruals basis using the rate of interest agreed with the bank.
Investment management fee, performance incentive fee and other expenses
All expenses have been accounted for on an accruals basis. Expenses are charged through the other distributable reserve except the following which are charged through the realised capital reserve:
-- 90% of management fees and 100% of performance incentive fees, if any,
are allocated to the realised capital reserve. This has changed from 75%
for both management fees and performance incentive fees in the year ended
31 March 2022, to better align with the Board's expectation that over the
long term the majority of the Company's investment returns will be in the
form of capital gains; and
-- expenses which are incidental to the purchase or disposal of an
investment are charged through the realised capital reserve.
Taxation
Taxation is applied on a current basis in accordance with FRS 102. Current tax is tax payable/(refundable) in respect of the taxable profit (tax loss) for the current period or past reporting periods using the tax rates and laws that have been enacted or substantively enacted at the financial reporting date. Taxation associated with capital expenses is applied in accordance with the SORP.
Deferred tax is provided in full on all timing differences at the reporting date. Timing differences are differences between taxable profits and total comprehensive income as stated in the Financial Statements that arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the Financial Statements. As a VCT the Company has an exemption from tax on capital gains. The Company intends to continue meeting the conditions required to obtain approval as a VCT for the foreseeable future. The Company therefore, should have no material deferred tax timing differences arising in respect of the revaluation or disposal of investments and the Company has not provided for any deferred tax.
Share capital and reserves
Called-up share capital
This accounts for the nominal value of the Company's shares.
Share premium
This accounts for the difference between the price paid for the Company's shares and the nominal value of those shares, less issue costs and transfers to the other distributable reserve.
Capital redemption reserve
This reserve accounts for amounts by which the issued share capital is diminished through the repurchase and cancellation of the Company's own shares.
Unrealised capital reserve
Increases and decreases in the valuation of investments held at the year end against cost are included in this reserve.
Realised capital reserve
The following are disclosed in this reserve:
-- gains and losses compared to cost on the realisation of investments, or
permanent diminutions in value (including gains recognised on the
realisation of investment where consideration is deferred that are not
distributable as a matter of law);
-- finance income in respect of the unwinding of the discount on deferred
consideration that is not distributable as a matter of law;
-- expenses, together with the related taxation effect, charged in
accordance with the above policies; and
-- dividends paid to equity holders where paid out by capital.
Other distributable reserve
The special reserve, treasury share reserve and the revenue reserve were combined in 2013 to form a single reserve named other distributable reserve.
This reserve accounts for movements from the revenue column of the Income statement, the payment of dividends, the buy-back of shares, transfers from the share premium and capital redemption reserve, and other non-capital realised movements.
Dividends
Dividends by the Company are accounted for when the liability to make the payment (record date) has been established.
Going concern
The Board has assessed the Company's operation as a going concern. The Company has sufficient cash and liquid resources, its portfolio of investments is well diversified in terms of sector, and the major cash outflows of the Company (namely investments, buy-backs and dividends) are within the Company's control. Cash flow forecasts are discussed quarterly at Board level with regards to going concern. The cash flow forecasts have been updated and stress tested. Accordingly, after making diligent enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence over a period of at least twelve months from the date of approval of the Financial Statements. For this reason, the Directors have adopted the going concern basis in preparing the accounts. The Directors do not consider there to be any material uncertainty over going concern.
Segmental reporting
The Directors are of the opinion that the Company is engaged in a single operating segment of business, being investment in smaller companies principally based in the UK.
3. Gains/(losses) on investments
Year ended Year ended
31 March 2022 31 March 2021
GBP'000 GBP'000
-------------------------------------------- -------------- --------------
Unrealised gains on fixed asset investments 17,239 8,836
Realised gains on fixed asset investments 4,129 1,866
Finance income from deferred consideration 268 -
Realised gains on current asset investments - 190
21,636 10,892
-------------- --------------
4. Investment income
Year ended Year ended
31 March 2022 31 March 2021
GBP'000 GBP'000
Loan stock interest 883 434
Dividend income - 94
Bank deposit interest 3 15
886 543
-------------- --------------
5. Investment Manager's fees
Year ended Year ended
31 March 2022 31 March 2021
GBP'000 GBP'000
Investment management fees charged to revenue 196 366
Investment management fees charged to capital 1,762 1,098
Performance incentive fee charged to revenue - 72
Performance incentive fee charged to capital 1,934 216
-------------- --------------
3,892 1,752
-------------- --------------
Further details of the Management agreement under which the investment management fee and performance incentive fee are paid is given in the Strategic report above.
During the year, services of a total value of GBP4,090,000 (2021: GBP1,905,000) were purchased by the Company from Albion Capital Group LLP; this includes GBP1,958,000 (2021: GBP1,464,000) of management fee, GBP198,000 (2021: GBP153,000) of administration fee; and a performance incentive fee of GBP1,934,000 (2021: GBP288,000). At the financial year end, the amount due to Albion Capital Group LLP in respect of these services disclosed as accruals was GBP2,562,000 (2021: GBP739,000). The total annual running costs of the Company are capped at an amount equal to 2.5% of the Company's net assets, with any excess being met by Albion Capital Group LLP by way of a reduction in management fees. During the year, the management fee was reduced by GBP22,000 as a result of this cap (2021: GBP53,000).
During the year, the Company was not charged by Albion Capital Group LLP in respect of Patrick Reeve's services as a Director (2021: GBPnil).
Albion Capital Group LLP, its partners and staff hold a total of 687,260 shares in the Company on 31 March 2022.
The Manager is, from time to time, eligible to receive arrangement fees and monitoring fees from portfolio companies. During the year ended 31 March 2022, fees of GBP177,000 attributable to the investments of the Company were received pursuant to these arrangements (2021: GBP205,000).
The Company has entered into an offer agreement relating to the Offers with the Manager, Albion Capital Group LLP, pursuant to which Albion Capital will receive a fee of 2.5% of the gross proceeds of the Offers and out of which Albion Capital will pay the costs of the Offers, as detailed in the Prospectus.
6. Other expenses
Year ended Year ended
31 March 2022 31 March 2021
GBP'000 GBP'000
Directors' fees (including NIC) 97 95
Auditor's remuneration for statutory audit services
(exclusive of VAT) 39 37
Administration fee 198 153
Other administrative expenses 215 169
-------------- --------------
549 454
-------------- --------------
7. Directors' fees
The amounts paid to and on behalf of the Directors during the year are as follows:
Year ended Year ended
31 March 2022 31 March 2021
GBP'000 GBP'000
Directors' fees 90 88
National insurance 7 7
97 95
-------------- --------------
The Company's key management personnel are the non-executive Directors. Further information regarding Directors' remuneration can be found in the Directors' remuneration report on pages 45 to 47 of the full Annal Report and Financial Statements.
8. Tax on ordinary activities
Year ended Year ended
31 March 2022 31 March 2021
GBP'000 GBP'000
- -
UK corporation tax charge in respect of current year
- -
-------------- --------------
Year ended Year ended
31 March 2022 31 March 2021
Factors affecting the tax charge: GBP'000 GBP'000
--------------------------------------------------- -------------- --------------
Return on ordinary activities before taxation 18,081 9,229
-------------- --------------
Tax charge on profit at the average companies rate
of 19%
(2021: 19%) 3,435 1,754
Factors affecting the charge:
Non-taxable gains (4,111) (2,069)
Income not taxable - (18)
Excess management expenses carried forward 676 333
- -
-------------- --------------
The tax charge for the year shown in the Income statement is lower than the average companies rate of corporation tax in the UK of 19% (2021: 19%). The differences are explained above.
Notes
(i) Venture Capital Trusts are not subject to corporation tax on capital gains. (ii) Tax relief on expenses charged to capital has been determined by allocating tax relief to expenses by reference to the applicable corporation tax rate and allocating the relief between revenue and capital in accordance with the SORP. (iii) The Company has excess management expenses of GBP11,649,000 (2021: GBP8,090,000) that are available for offset against future profits. A deferred tax asset of GBP2,912,000 (2021: GBP1,537,000) has not been recognised in respect of these losses as they will be recoverable only to the extent that the Company has sufficient future taxable profits.
9. Dividends
Year ended
Year ended 31 March 2021
31 March 2022 GBP'000 GBP'000
------------------------------------------------------- ---------------------- --------------
First dividend of 2.87p per share paid on 31 August
2021 (28 August 2020 -- 2.70p per share) 2,139 1,836
Second dividend of 3.22p per share paid on 28 February
2022 (26 February 2021 -- 2.74p per share) 2,391 1,854
Unclaimed dividends (2) (2)
4,528 3,688
---------------------- --------------
Details of the consideration issued under the Dividend Reinvestment Scheme included in the dividends above can be found in note 15.
In addition to the dividends summarised above, the Board has declared a first dividend for the year ending 31 March 2023 of 3.31 pence per share to be paid on 31 August 2022 to shareholders on the register on 5 August 2022. The total dividend will be approximately GBP2,984,000.
10. Basic and diluted return per share
Year ended Year ended
31 March 2022 31 March 2021
Revenue Capital Total Revenue Capital Total
-------------------------------------------------------- ------- ------- ------ ------- ------- -----
Return/(loss) attributable to equity shares (GBP'000) 141 17,940 18,081 (349) 9,578 9,229
Weighted average shares in issue (adjusted for treasury
shares) 75,440,864 68,620,876
Return/(loss) attributable per equity share (pence) 0.19 23.78 23.97 (0.51) 13.96 13.45
There are no convertible instruments, derivatives or contingent share agreements in issue for the Company, and therefore no dilution affecting the return per share. The basic return per share is therefore the same as the diluted return per share.
The weighted average number of shares is calculated after adjusting for treasury shares of 12,195,568 (2021: 10,713,420).
11. Fixed asset investments
Investments held at fair value through profit or 31 March 2022 31 March 2021
loss GBP'000 GBP'000
Unquoted equity and preference shares 68,138 48,450
Unquoted loan stock 11,486 12,165
Quoted equity 1,218 -
------------- ---------------
80,842 60,615
------------- ---------------
31 March 2022 31 March 2021
GBP'000 GBP'000
---------------------------------------------------- ------------- -------------
Opening valuation 60,615 47,859
Purchases at cost 8,952 7,324
Disposal proceeds (10,151) (5,270)
Realised gains 4,129 1,866
Movement in loan stock revenue accrued income 58 -
Unrealised gains 17,239 8,836
------------- -------------
Closing valuation 80,842 60,615
------------- -------------
Movement in loan stock revenue accrued income
Opening accumulated loan stock revenue accrued
income 1 1
Movement in loan stock revenue accrued income 58 -
------------- -------------
Closing accumulated loan stock revenue accrued
income 59 1
------------- -------------
Movement in unrealised gains
Opening accumulated unrealised gains 17,539 10,129
Movement in unrealised gains 17,239 8,836
Transfer of previously unrealised gains to realised
reserve on disposal of investments (1,987) (1,426)
------------- -------------
Closing accumulated unrealised gains 32,791 17,539
------------- -------------
Historic cost basis
Opening book cost 43,076 37,730
Purchases at cost 8,952 7,324
Disposals at cost (4,035) (1,978)
------------- -------------
Closing book cost 47,993 43,076
------------- -------------
Purchases and disposals detailed above do not agree to the Statement of cash flows due to restructuring of investments, conversion of convertible loan stock and settlement debtors and creditors.
Unquoted fixed asset investments are valued at fair value in accordance with the IPEV guidelines as follows:
31 March 31 March
2022 2021
Valuation methodology GBP'000 GBP'000
-------------------------------------------------- ------------ ------------
Cost and price of recent investment (reviewed for
impairment or uplift) 39,353 23,438
Revenue multiple 26,204 25,130
Third party valuation -- Discounted cash flow 6,422 6,448
Third party valuation -- Earnings multiple 3,417 3,053
Net assets 1,146 141
Earnings multiple 3,082 2,405
79,624 60,615
------------ ------------
When using the cost or price of a recent investment in the valuations, the Company looks to re-calibrate this price at each valuation point by reviewing progress within the investment, comparing against the initial investment thesis, assessing if there are any significant events or milestones that would indicate the value of the investment has changed and considering whether a market-based methodology (i.e. using multiples from comparable public companies) or a discounted cashflow forecast would be more appropriate.
The main inputs into the calibration exercise, and for the valuation models using multiples, are revenue, EBITDA and P/E multiples (based on the most recent revenue, EBITDA or earnings achieved and equivalent corresponding revenue, EBITDA or earnings multiples of comparable companies), quality of earnings assessments and comparability difference adjustments. Revenue multiples are often used, rather than EBITDA or earnings, due to the nature of the Company's investments, being in growth and technology companies which are not normally expected to achieve profitability or scale for a number of years. Where an investment has achieved scale and profitability the Company would normally then expect to switch to using an EBITDA or earnings multiple methodology.
In the calibration exercise and in determining the valuation for the Company's equity instruments, comparable trading multiples are used. In accordance with the Company's policy, appropriate comparable companies based on industry, size, developmental stage, revenue generation and strategy are determined and a trading multiple for each comparable company identified is then calculated. The multiple is calculated by dividing the enterprise value of the comparable group by its revenue, EBITDA or earnings. The trading multiple is then adjusted for considerations such as illiquidity, marketability and other differences, advantages and disadvantages between the portfolio company and the comparable public companies based on company specific facts and circumstances.
Fair value investments had the following movements between valuation methodologies between 31 March 2021 and 31 March 2022:
Change in valuation methodology (2021 to 2022) Value on Explanatory
31 March 2022 note
GBP'000
------------------------------------------------------- -------------- -----------
Revenue multiple to cost and price of recent investment 2,107 More
(reviewed for impairment or uplift) appropriate
valuation
methodology
Cost and price of recent investment (reviewed for 1,377 More
impairment or uplift) to revenue multiple appropriate
valuation
methodology
Cost and price of recent investment (reviewed for 1,218 Company
impairment or uplift) to bid price listed on
AIM in
period
Cost and price of recent investment (reviewed for 1,078 More
impairment or uplift) to net assets appropriate
valuation
methodology
Third party valuation - earnings multiple to net assets 68 More
appropriate
valuation
methodology
The valuation will be the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the IPEV Guidelines. The Directors believe that, within these parameters, these are the most relevant methods of valuation which would be reasonable on 31 March 2022.
FRS 102 and the SORP requires the Company to disclose the inputs to the valuation methods applied to its investments measured at fair value through profit or loss in a fair value hierarchy. The table below sets out fair value hierarchy definitions using FRS102 s.11.27.
Fair value hierarchy Definition
-------------------- ----------------------------------------------------
Level 1 Unadjusted quoted prices in an active market
-------------------- ----------------------------------------------------
Level 2 Inputs to valuations are from observable sources and
are directly or indirectly derived from prices
-------------------- ----------------------------------------------------
Level 3 Inputs to valuations not based on observable market
data
-------------------- ----------------------------------------------------
Quoted investments are valued according to Level 1 valuation methods. Unquoted equity, preference shares and loan stock are all valued according to Level 3 valuation methods.
Investments held at fair value through profit or loss (Level 3) had the following movements:
31 March 2022 31 March 2021
GBP'000 GBP'000
----------------------------------- -------------- --------------
Opening balance 60,615 47,859
Additions 8,952 7,324
Movement from Level 3 to Level 1* (573) -
Disposals (10,151) (5,270)
Realised gains 4,129 1,866
Accrued loan stock interest 58 -
Unrealised gains 16,594 8,836
-------------- --------------
Closing balance 79,624 60,615
-------------- --------------
* This relates to Arecor Therapeutics PLC, which listed on the AIM stock exchange during the period. This is the only Level 1 investment.
There are no Level 2 investments.
FRS 102 requires the Directors to consider the impact of changing one or more of the inputs used as part of the valuation process to reasonable possible alternative assumptions. 63% of the portfolio of investments, consisting of equity and loan stock, is based on recent investment price, net assets and cost, which are considered the most appropriate valuation methodology. As such the Board believes that changes to reasonable possible alternative input assumptions (by adjusting the earnings and revenue multiples) for the valuation of the remainder of the portfolio could lead to a significant change in the fair value of the portfolio. Therefore, for the remainder of the portfolio, the Board has adjusted the inputs for a number of the largest portfolio companies (by value) resulting in a total coverage of 91% of the portfolio of investments.
The main inputs considered for each type of valuation is as follows:
Change in
fair value
Change of Change in NAV
in investments (pence per
Valuation technique Portfolio company sector Input Base Case* input (GBP'000) share)
--------------------------------------------- ------------------------------------------ --------------------------------------------- -------------------- ------ ----------- -----------------
Revenue multiple Other software & technology Revenue multiple 5.9x +0.6x 1,331 1.49
--------------------------------------------- ------------------------------------------ --------------------------------------------- -------------------- ------ ----------- -----------------
-0.6x (1,331) (1.49)
----------------------------------------------------------------------------------------------------------------------------------------------------------- ------ ----------- -----------------
Revenue multiple Healthcare (including digital healthcare) Revenue multiple 5.6x +0.6x 627 0.70
--------------------------------------------- ------------------------------------------ --------------------------------------------- -------------------- ------ ----------- -----------------
-0.6x (627) (0.70)
----------------------------------------------------------------------------------------------------------------------------------------------------------- ------ ----------- -----------------
Third party valuation -- discounted cashflow Renewable energy Third party valuation -- discounted cashflow 10.0% discount rate +0.5% 176 0.20
--------------------------------------------- ------------------------------------------ --------------------------------------------- -------------------- ------ ----------- -----------------
-0.5% (227) (0.25)
----------------------------------------------------------------------------------------------------------------------------------------------------------- ------ ----------- -----------------
*As detailed in the accounting policies above, the base case is based on market comparables, discounted where appropriate for marketability, in accordance with the IPEV guidelines.
The impact of these changes could result in an overall increase in the valuation of the equity investments by GBP2,134,000 (3.1%) (2021: GBP1,605,000 (3.3%)) or a decrease in the valuation of equity investments by GBP2,185,000 (3.2%) (2021: GBP2,268,000 (4.7%)).
12. Significant interests
The principal activity of the Company is to select and hold a portfolio of investments in unquoted securities. Although the Company, through the Manager, will, in some cases, be represented on the board of the portfolio company, it will not take a controlling interest or become involved in the management of a portfolio company. The size and structure of the companies with unquoted securities may result in certain holdings in the portfolio representing a participating interest without there being any partnership, joint venture or management consortium agreement. The investment listed below is held as part of an investment portfolio and therefore, as permitted by FRS 102 section 9.9B, it is measured at fair value through profit and loss and not accounted for using the equity method.
The Company has interests of greater than 20% of the nominal value of any class of the allotted shares in the portfolio company on 31 March 2022 as described below:
Registered % class
address and and % total
country of Profit/(loss) before tax Aggregate capital and reserves share voting
Company incorporation GBP'000 GBP'000 Result for year ended type rights
------------ -------------- ------------------------- ------------------------------ ---------------------- -------- -------
Greenenerco 28.6% A
Limited EC1M 5QL, UK n/a* 443 31 March 2021 Ordinary 28.6%
------------ -------------- ------------------------- ------------------------------ ---------------------- -------- -------
*The company files filleted accounts which do not disclose this information.
13. Trade and other receivables
31 March 2022 31 March 2021
GBP'000 GBP'000
-------------------------------------- ------------- -------------
Deferred consideration under one year 488 149
Deferred consideration over one year 1,867 1,600
Prepayments and accrued income 26 21
Other receivables 8,344 2
10,725 1,772
------------- -------------
The deferred consideration over one year relates to the sale of G.Network Communications Limited in December 2020. These proceeds are receivable in January 2024, and have been discounted to present value at the prevailing market rate, including a provision for counterparty risk. This constitutes a financing transaction, and has been accounted for using the policy disclosed in note 2.
Other debtors includes GBP8,342,000 (GBPnil) owed to the Company in respect of the allotment of shares that took place on 31 March 2022 and was received on 1 April 2022. Further details are given in note 15.
The Directors consider that the carrying amount of receivables is not materially different to their fair value.
14. Trade and other payables less than one year
31 March 2022 31 March 2021
GBP'000 GBP'000
----------------------------- ------------- -------------
Accruals and deferred income 2,662 812
Trade payables 42 606
2,704 1,418
------------- -------------
The Directors consider that the carrying amount of payables is not materially different to their fair value.
15. Called-up share capital
Allotted, called-up and fully paid shares: GBP'000 ------------------------------------------------------- ------- 85,232,100 Ordinary shares of 1 penny each at 31 March 2021 852 16,479,705 Ordinary shares of 1 penny each issued during the year 165 ------------------------------------------------------- ------- 101,711,805 Ordinary shares of 1 penny each at 31 March 2022 1,017 ------------------------------------------------------- ------- 10,713,420 Ordinary shares of 1 penny each held in treasury at 31 March 2021 (107) 1,482,148 Ordinary shares of 1 penny each purchased during the year to be held in treasury (15) ------------------------------------------------------- ------- 12,195,568 Ordinary shares of 1 penny each held in treasury at 31 March 2022 (122) ------------------------------------------------------- ------- Voting rights of 89,516,237 Ordinary shares of 1 penny each at 31 March 2022 895 ------------------------------------------------------- -------
The Company purchased 1,482,148 shares (2021: 1,768,106) to be held in treasury at a nominal value of GBP14,821 and a cost of GBP1,795,000 (2021: GBP1,853,000) representing 1.5% of the shares in issue on 31 March 2022, leading to a balance of 12,195,568 shares (2021: 10,713,420) in treasury representing 12.0% (2021: 12.6%) of the shares in issue on 31 March 2022.
Under the terms of the Dividend Reinvestment Scheme Circular (dated 26 November 2009), the following new Ordinary shares of nominal value 1 penny each were allotted during the year:
Aggregate
nominal value Net
Date of Number of of shares Issue price invested Opening market price on allotment date (pence per
allotment shares allotted (GBP'000) (pence per share) (GBP'000) share)
----------
31 August
2021 275,632 3 125.06 327 119.50
28
February
2022 290,517 3 129.67 359 123.50
---------------- ----------
566,149 686
---------------- ----------
During the year the following new Ordinary shares of nominal value 1 penny each were allotted under the terms of the Albion VCTs Prospectus Top Up Offers 2020/21 and 2021/22:
Aggregate Net
nominal value consideration
Date of Number of of shares Issue price received Opening market price on allotment date (pence per
allotment shares allotted (GBP'000) (pence per share) (GBP'000) share)
---------- ---------------- -------------- ------------------ -------------- -------------------------------------------------
9 April
2021 144,118 1 114.00 162 106.50
9 April
2021 9,249 - 114.60 10 106.50
9 April
2021 229,987 2 115.20 258 106.50
25
February
2022 973,740 10 131.70 1,263 123.50
25
February
2022 317,042 3 132.40 411 123.50
25
February
2022 7,806,927 78 133.00 10,125 123.50
31 March
2022 6,432,493 64 133.00 8,342 122.50
15,913,556 20,571
---------------- --------------
16. Basic and diluted net asset value per share
31 March 2022 31 March 2021
(pence per share) (pence per share)
---------------------------------------- ----------------- -----------------
Basic and diluted net asset value per
Ordinary share 132.28 114.60
The basic and diluted net asset value per share at the year end is calculated in accordance with the Articles of Association and is based upon total shares in issue (excluding treasury shares) of 89,516,237 Ordinary shares (2021: 74,518,680) at 31 March 2022.
17. Capital and financial instruments risk management
The Company's capital comprises Ordinary shares as described in note 15. The Company is permitted to buy-back its own shares for cancellation or treasury purposes, and this is described on page 33 of the Directors' report in the full Annual report and Financial Statements.
The Company's financial instruments comprise equity and loan stock investments in unquoted and quoted companies, cash balances, short term receivables and payables which arise from its operations. The main purpose of these financial instruments is to generate cash flow and revenue and capital appreciation for the Company's operations. The Company has no gearing or other financial liabilities apart from short term payables. The Company does not use any derivatives for the management of its Balance sheet.
The principal risks arising from the Company's operations are:
-- market and investment risk (which comprises investment price and cash
flow interest rate risk);
-- credit risk; and
-- liquidity risk.
The Board regularly reviews and agrees policies for managing each of these risks. There have been no changes in the nature of the risks that the Company has faced during the past year, and apart from where noted below, there have been no changes in the objectives, policies or processes for managing risks during the past year. The key risks are summarised below.
Market risk
As a Venture Capital Trust, it is the Company's specific nature to evaluate the market risk of its portfolio in unquoted companies. Market risk is the exposure of the Company to the revaluation and devaluation of investments as a result of macroeconomic changes. The main driver of market risk is the dynamics of market quoted comparators, as well as the financial and operational performance of portfolio companies. The Board seeks to reduce this risk by having a spread of investments across a variety of sectors. More details on the sectors the Company invests in can be found in the pie chart at the end of this announcement.
The Manager and the Board formally review market risk, both at the time of initial investment and at quarterly Board meetings.
The Board monitors the prices at which sales of investments are made to ensure that profits to the Company are maximised, and that valuations of investments retained within the portfolio appear sufficiently prudent and realistic compared to prices being achieved in the market for sales of unquoted investments.
Under FRS 102 the Board is required to illustrate by way of a sensitivity analysis the extent to which the assets are exposed to market risk. The Board considers that the value of the fixed asset investment portfolio is sensitive to a change of 10% based on the current economic climate. The impact of a 10% change has been selected as this is considered reasonable given the current level of volatility observed. When considering the appropriate level of sensitivity to be applied, the Board has considered both historic performance and future expectations.
The sensitivity of a 10% increase or decrease in the valuation of the fixed asset investment portfolio (keeping all other variables constant) would increase or decrease the net asset value and return for the year by GBP8,084,000. Further sensitivity analysis on fixed asset investments is included in note 11.
Investment risk (including investment price risk)
Investment risk (including investment price risk) is the risk that the fair value of future investment cash flows will fluctuate due to factors specific to an investment instrument or to a market in similar instruments. The management of risk within the venture capital portfolio is addressed through careful investment selection, by diversification across different industry segments, by maintaining a wide spread of holdings in terms of financing stage and by limitation of the size of individual holdings. The Manager receives management accounts from portfolio companies and members of the investment management team often sit on the boards of unquoted portfolio companies; this enables the close identification, monitoring and management of investment risk. The Directors monitor the Manager's compliance with the investment policy, review and agree policies for managing this risk and monitor the overall level of risk on the portfolio on a regular basis.
Valuations are based on the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the IPEV Guidelines. Details of the industries in which investments have been made are contained in the pie chart at the end of this announcement.
The maximum investment risk on the balance sheet date is the value of the fixed asset investment portfolio which is GBP80,842,000 (2021: GBP60,615,000). Fixed asset investments form 68% of the net asset value on 31 March 2022 (2021: 71%).
More details regarding the classification of fixed asset investments are shown in note 11.
Interest rate risk
It is the Company's policy to accept a degree of interest rate risk on its financial assets through the effect of interest rate changes. On the basis of the Company's analysis, it was estimated that a rise of 1% in all interest rates would have increased total return before tax for the year by approximately GBP270,000 (2021: GBP230,000). Furthermore, it was considered that a fall of interest rates below current levels during the year would have been very unlikely.
The weighted average effective interest rate applied to the Company's unquoted loan stock during the year was approximately 9.8% (2021: 4.9%). The weighted average period to expected maturity for the unquoted loan stock is approximately 4.0 years (2021: 4.5 years).
The Company's financial assets and liabilities, all denominated in pounds sterling, consist of the following:
31 March 2022 31 March 2021
Non- Non-
Fixed Floating interest Fixed Floating interest
rate rate bearing Total rate rate bearing Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- -------- -------- --------- -------- -------- -------- --------- --------
Unquoted
equity - - 68,138 68,138 - - 48,450 48,450
Quoted equity - - 1,218 1,218 - - - -
Unquoted loan
stock 9,934 - 1,552 11,486 11,508 - 657 12,165
Receivables* - - 10,699 10,699 - - 1,751 1,751
Current
liabilities - - (2,704) (2,704) - - (1,418) (1,418)
Cash - 29,552 - 29,552 - 24,429 - 24,429
9,934 29,552 78,903 118,389 11,508 24,429 49,440 85,377
-------- -------- --------- -------- -------- -------- --------- --------
*The receivables do not reconcile to the Balance sheet as prepayments are not included in the above table.
Credit risk
Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Company is exposed to credit risk through its receivables, investment in unquoted loan stock and through the holding of cash on deposit with banks.
The Manager evaluates credit risk on loan stock and other similar instruments prior to investment, and as part of its ongoing monitoring of investments. In doing this, it takes into account the extent and quality of any security held. For loan stock investments made prior to 6 April 2018, which account for 70% of loan stock by value, typically loan stock instruments have a fixed or floating charge, which may or may not have been subordinated, over the assets of the portfolio company in order to mitigate the gross credit risk.
The Manager receives management accounts from portfolio companies, and members of the investment management team often sit on the boards of unquoted portfolio companies; this enables the close identification, monitoring and management of investment-specific credit risk.
The Manager and the Board formally review credit risk (including receivables) and other risks, both at the time of initial investment and at quarterly Board meetings.
The Company's total gross credit risk on 31 March 2022 was limited to GBP11,486,000 (2021: GBP12,165,000) of unquoted loan stock instruments, GBP29,552,000 (2021: GBP24,429,000) of cash deposits with banks and GBP10,725,000 (2021: GBP1,751,000) of other receivables.
At the balance sheet date, the cash held by the Company was held with Lloyds Bank plc, Scottish Widows Bank plc (part of Lloyds Banking Group plc), Barclays Bank plc, Société Générale S.A and National Westminster Bank plc. Credit risk on cash transactions was mitigated by transacting with counterparties that are regulated entities subject to prudential supervision, with high credit ratings assigned by international credit-rating agencies.
The Company has an informal policy of limiting counterparty banking exposure to a maximum of 20% of net asset value for any one counterparty.
The credit profile of unquoted loan stock is described under liquidity risk below.
Liquidity risk
Liquid assets are held as cash on current account, cash on deposit or short term money market account. Under the terms of its Articles, the Company has the ability to borrow up to 10% of its adjusted share capital and reserves of the latest published audited Balance sheet, which amounts to GBP11,543,000 (2021: GBP8,325,000) on 31 March 2022.
The Company has no committed borrowing facilities on 31 March 2022 (2021: nil) and had cash of GBP29,552,000 (2021: GBP24,429,000). The main cash outflows are for new investments, share buy-backs and dividend payments, which are within the control of the Company. The Manager formally reviews the cash requirements of the Company on a monthly basis, and the Board on a quarterly basis as part of its review of management accounts and forecasts. All the Company's financial liabilities are short term in nature and total GBP2,704,000 on 31 March 2022 (2021: GBP1,418,000).
The carrying value of loan stock investments as analysed by expected maturity dates is as follows:
31 March 2022 31 March 2021
Redemption Fully performing Past due Valued below cost Total Fully performing Past due Valued below cost Total
date GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------- -------------------------------- ---------------- ---------------------------------- ------------- ---------------- -------- ----------------- --------
Less than
one year 4,811 - 70 4,881 2,752 - 206 2,958
1-2 years 94 - 2 96 1,362 656 45 2,063
2-3 years 2,092 - 3 2,095 93 - 161 254
3-5 years 1,894 - - 1,894 4,322 - 8 4,330
Greater
than 5
years 2,520 - - 2,520 2,560 - - 2,560
-------------------------------- ---------------- ---------------------------------- ---------------- -------- ----------------- --------
Total 11,411 - 75 11,486 11,089 656 420 12,165
-------------------------------- ---------------- ---------------------------------- ------------- ---------------- -------- ----------------- --------
Loan stock can be past due as a result of interest or capital not being paid in accordance with contractual terms.
The cost of loan stock investments valued below cost is GBP544,000 (2021: GBP510,000).
The Company does not hold any assets as the result of the enforcement of security during the period, and believes that the carrying values for both those valued below cost and past due assets are covered by the value of security held for these loan stock investments.
In view of the availability of adequate cash balances and the repayment profile of loan stock investments, the Board considers that the Company is subject to low liquidity risk.
Fair values of financial assets and financial liabilities
All the Company's financial assets and liabilities on 31 March 2022 are stated at fair value as determined by the Directors, with the exception of receivables (including debtors due after more than one year), payables and cash which are carried at amortised cost, in accordance with FRS 102. There are no financial liabilities other than payables. The Company's financial liabilities are all non-interest bearing. It is the Directors' opinion that the book value of the financial liabilities is not materially different to the fair value and all are payable within one year.
18. Commitments and contingencies
On 31 March 2022, the Company had no financial commitments (2021: GBPnil).
There were no contingent liabilities or guarantees given by the Company on 31 March 2022 (2021: GBPnil).
19. Post balance sheet events
Since 31 March 2022 the Company has had the following post balance sheet events:
-- Investment of GBP1,037,000 in a new portfolio company;
-- Investment of GBP668,000 in an existing portfolio company, Gravitee TopCo
Limited;
-- Investment of GBP526,000 in a new portfolio company, Ophelos Limited;
-- Investment of GBP265,000 in an existing portfolio company, Cantab
Research Limited;
-- Investment of GBP252,000 in an existing portfolio company, Accelex
Technology Limited; and
-- Investment of GBP75,000 in an existing portfolio company, Concirrus
Limited.
The following new Ordinary shares of nominal value 1 penny each were allotted under the Albion VCTs Prospectus Top Up Offers 2021/22 after 31 March 2022:
Number Aggregate
of nominal Net
Date of shares value of consideration
allotment allotted shares Issue price (pence per received Opening market price on allotment date
GBP'000 share) GBP'000 (pence per share)
---------- -------- --------- ----------------------- ------------- ---------------------------------------
11 April
2022 133,797 1 131.70 174 122.50
11 April
2022 17,745 - 132.40 23 122.50
11 April
2022 492,987 5 133.00 639 122.50
644,529 836
-------- -------------
20. Related party transactions
Other than transactions with the Manager as disclosed in note 5, and the Directors' remuneration disclosed in the Directors' remuneration report on page 46 of the full Annual Report and Financial Statements, there are no other related party transactions or balances requiring disclosure.
21. Other Information
The information set out in this announcement does not constitute the Company's statutory accounts within the terms of section 434 of the Companies Act 2006 for the years ended 31 March 2022 and 31 March 2021, and is derived from the statutory accounts for those financial years, which have been, or in the case of the accounts for the year ended 31 March 2022, which will be, delivered to the Registrar of Companies. The Auditor reported on those accounts; the reports were unqualified and did not contain a statement under s498 (2) or (3) of the Companies Act 2006.
22. Publication
The full audited Annual Report and Financial Statements are being sent to shareholders and copies will be made available to the public at the registered office of the Company, Companies House, the National Storage Mechanism and also electronically at www.albion.capital/funds/AAEV, where the Report can be accessed as a PDF document via a link in the 'Financial Reports and Circulars' section.
Attachment
-- Pie charts
https://ml-eu.globenewswire.com/Resource/Download/7dcb9ce0-2326-4031-ac8a-7c91ef59c930
(END) Dow Jones Newswires
June 30, 2022 10:40 ET (14:40 GMT)
Copyright (c) 2022 Dow Jones & Company, Inc.
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